Does Your Credit Report Have Errors?

Mistakes by Credit Reference Agencies Could Affect Credit Scores

May 6, 2009

Consumers that apply for credit may face loan rejection because of a low credit score. Experian, Equifax and TransUnion are failing to amend errors on credit reports.

Millions of consumers are likely to find that their credit scores are adversely affected by 'uncorrected' errors. According to Bob Tedeschi in The New York Times article "Faulting Credit Firms on Fixing Errors" the process used by credit reference agencies to correct errors is failing, resulting in unsuccessful mortgage and loan applications due to bad credit.

Correcting Errors on Credit Reports

The Fair Credit Reporting Act 1970 requires that consumers amend the error on their credit report with the credit reference agency, not the financial institution. The exception to this rule is errors in relation to credit cards where the consumer is entitled to contact the provider directly. Those who plan to apply for credit need to do so several months in advance.

Chi Chi Wu, a staff lawyer for the Boston-based National Consumer Law Center, stated that "Credit bureaus generally fail to forward the creditors any supporting documentation sent to them by the consumer, like canceled checks. Rather, the disputes are essentially boiled down to two-digit codes that represent a category of complaint, and then they are forwarded to creditors."

Are Credit Reference Agencies or Consumers at Fault?

The Consumer Data Industry Association (a trade group that represents credit reference agencies) believes that “up to 3 percent” of all credit reports contains errors. Stuart K. Pratt, the president of the Consumer Data Industry Association, acknowledged that there were problems with the way credit reference agencies processed amendments. However, he also said that: "55 to 60 percent of consumer disputes contained no supporting documentation."

Proposed Legislative Changes Could Help Credit Scores

Rebecca Kuehn, an assistant director of the Federal Trade Commission, stated that the Obama administration is likely to announce plans to allow consumers to contact financial organizations directly in order to get errors corrected. The new proposed legislation will give them 6 to 12 months to make the relevant alterations.

A low credit score doesn't always happen because of missed or late payments. Those who wish to apply for credit should check their credit report prior to applying for financial products. Should an error be identified, provide credit reference agencies with the relevant supporting information. Failing to perform sufficient checks in advance could result in mortgage and loan application being declined due to bad credit.

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Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.

The copyright of the article Does Your Credit Report Have Errors? in Consumer Education is owned by Asa Ghaffar. Permission to republish Does Your Credit Report Have Errors? in print or online must be granted by the author in writing.